There is an interaction between a Centrelink payment and a compensation payout. This area of law can be complex and legal advice should be sought.

If a person receives an injury compensation payout, such as one due to a personal injury motor vehicle accident or workers compensation payout, it may impact their existing Centrelink payment or their ability to apply for a Centrelink payment [see Social Security Act 1991 (Cth) s 17].

The rationale behind this is that if a person is compensated for loss of income for a period of time through the payment of lump sum compensation, they should not also receive social security assistance at the same time for the same period.

Receiving a payment due to injury may result in a person’s Centrelink payments being reduced or their eligibility to apply for a payment being  restricted for a period of time, called a preclusion period.

Preclusion periods may apply depending on the type of compensation a person receives, and what they received it for [see Social Security Act 1991 (Cth) sections 17(8), s 1169, s 1170].

There are specific formulas that Centrelink uses to calculate a preclusion period which will be calculated based on the lump sum amount of compensation they received [see s 1170]. There may also be instances where a person will be required to pay back an amount of Centrelink payments they received after they were injured. If a person is due to receive a lump sum payout from an insurance company, Centrelink can require the insurance company to pay them any monies owed before the person receives their payout. This is known as a compensation charge [see Social Security Act 1991 (Cth) sections 1182, s 1184, s 1184A].

A person can ask Centrelink to disregard their compensation payout or shorten a preclusion period if special circumstances exist [s 1184K]. The law is very strict in this area.

The interaction between Centrelink payments and compensation payouts can be complex, so legal advice should be sought in these circumstances, particularly if a review of the decision is sought.